If There Is a General Shortage of Liquidity in the Money

question 41

Multiple Choice

If there is a general shortage of liquidity in the money market then

• A) the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response.
• B) the economy's banking system will lend more money to households and firms.
• C) the short-term interest rate at which the economy's commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks.
• D) the short-term interest rate at which the economy's commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.

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Definitions:

Hydrogen Ions

Positively charged atoms of hydrogen that play crucial roles in chemical reactions, pH levels, and biological processes.

Tubular Secretion

A process in the kidneys where certain substances are actively transported from the blood into the tubular fluid to be excreted.

Renal Tubules

The tubular structures in the kidney where urine is formed through the process of filtration, reabsorption, and secretion.

Glomerular Filtration

The process by which the kidneys filter blood, removing excess waste and fluids to form urine.